This paper introduces a simple rule for appraising the economic soundness of fiscal policies. It connects fiscal policy to a long-run debt objective, taken as an anchor, while arbitraging symmetrically between this debt objective and output stabilisation. The rule offers a benchmark to assess the evolution of primary expenditure, net of the impact of discretionary revenue measures, taken as a proper operational target for annual fiscal policy. The properties and implications of this rule of thumb are analysed drawing on qualitative arguments and retrospective simulations.
|KC-AI-14-526-EN-N (online)||KC-AI-14-526-EN-C (print)|
|ISBN 978-92-79-35175-4 (online)||ISBN 978-92-79-36140-1 (print)|
|doi:10.2765/70540 (online)||doi:10.2765/80362 (print)|